In the volatile world of global energy markets, the sight of surging oil barrels floating at sea has sent shockwaves through traders and investors. As of late 2025, global crude supplies have ballooned, with an estimated 1.3 billion barrels of “oil on water”—the highest level since April 2020 and a staggering 30% increase from August.
Doomberg will be on the Energy News Beat Podcast with David Blackmon on January 6th, live on YouTube, to discuss the oil and gas markets.
This buildup, coupled with oil prices slumping below $60 a barrel (Brent futures dipping to under $59, their lowest since early 2021), has fueled fears of an impending glut that could overwhelm demand.
Yet, a closer examination reveals that this may not be a straightforward oversupply crisis but rather a symptom of market dysfunction driven by geopolitical tensions, sanctions, and logistical rerouting. In this market review, we’ll unpack the dynamics at play, highlighting strong underlying demand, the role of the “dark fleet,” and the potential for rebalancing toward a price range that aligns with Saudi Arabia’s strategic goals.
The Perceived Glut: Barrels Adrift and Market Jitters
The headlines are alarming: 51 million barrels stored on tankers for at least 20 days, the highest since June 2023, and laden crude tankers crawling at an average speed of 10 knots—the slowest since at least 2017.
This “billion-barrel oil glut forming at sea” has been labeled a dilemma, with “dark” barrels—those under sanctions—comprising up to 15% of global flows, too significant to ignore.
Oil prices have hit four-year lows as traders fixate on this apparent surplus, overshadowing even geopolitical flashpoints like U.S. blockades on Venezuelan tankers or potential peace talks in Ukraine.
Contributing factors include ramped-up production from the Western Hemisphere, particularly the U.S., and the Gulf region following OPEC+ scaling back cuts.
The International Energy Agency (IEA) forecasts global oil supply exceeding demand by a whopping 3.85 million barrels per day (bpd) in 2026—equivalent to 4% of global demand—painting a bearish picture that has inventories rising and prices under pressure.
But is this truly a glut, or is it a mislabeling of deeper market distortions?
Market Dysfunction: Sanctions, Dark Fleets, and Rerouting Realities
Hat tip to Art Berman on X for his post. While I do not always agree with Art, he has a great point.
Oil is falling because 1.3 billion barrels are stuck at sea, writes @ronbousso1
I’d fade that.
It’s a warning sign: not of oversupply, but of market dysfunction.
And dysfunctional systems don’t stay calm for long.https://t.co/CskPJXXTYB#oil #energymarkets #crude…
— Art Berman (@aeberman12) December 23, 2025
A key argument against labeling this as a pure glut is the impact of escalating sanctions on major producers like Russia and Venezuela. Tightening U.S. and EU measures—such as new sanctions on Russian giants Rosneft and Lukoil, and an EU package targeting Russia’s “shadow fleet” of hundreds of tankers—have forced oil to linger longer on the water.
Russian seaborne crude in transit has surged 55% to 155 million barrels, as these vessels operate outside Western financial systems, enabling exports to continue but at a slower pace.
The “dark fleet” has morphed to absorb these sanctions, with sanctioned oil (55-60% from Russia, 25-30% from Iran) being rerouted, blended, rebranded, or transferred ship-to-ship to destinations like China and India at steep discounts.
This isn’t idle surplus; it’s oil in extended transit due to political risks and compliance hurdles. U.S. sanctions on Russian oil producers are reshaping global supply chains, disrupting flows and increasing compliance risks for buyers.
Similarly, the U.S. blockade on Venezuelan tankers could shave off 500,000 bpd, but in a 100-million-bpd market, it’s a financial hit more than a supply shock.
These dynamics suggest the “glut” is often mislabeled. As one analysis notes, “There is a lot of oil… on the water, but it is in transit,” with the dark fleet adapting to sanctions rather than signaling oversupply.
Historically, sanctioned barrels eventually find buyers through creative logistics, indicating dysfunction rather than fundamental imbalance.
Strong Demand Underpinning the Market
Amid the gloom, global oil demand remains robust, countering the glut narrative. The IEA projects demand growth of 680,000 bpd in 2025 and 700,000 bpd in 2026, reaching 104.4 million bpd.
OPEC is even more optimistic, forecasting 1.3 million bpd growth in 2025 (unchanged) and raising its 2026 estimate to 1.4 million bpd, driven by economic optimism.
Other outlooks align: around 700,000 bpd in 2025 and 800,000 bpd in 2026, with non-OPEC+ supply lagging behind at 0.8 million bpd in 2026.
This steady demand growth, particularly in Asia, absorbs much of the rerouted supply. Even as inventories build, the market’s ability to integrate “dark” barrels underscores resilience, not collapse.
Post-Ukraine Peace and Long-Term Rebalancing
Looking ahead, a potential peace deal in Ukraine could influence the market, but effects may be muted. A deal might lead to a gradual, phased rollback of U.S. sanctions on Russia, with strict benchmarks, but Europe is unlikely to lift its permanent bans under the REPowerEU Roadmap.
This would remove some geopolitical risk premium from prices but maintain constraints on Russian exports, keeping rerouting and dark fleet operations in play.
For rebalancing, much depends on OPEC+, led by Saudi Arabia. The kingdom has signaled flexibility, previously abandoning an unofficial $100 target to focus on output increases.
Analysts estimate Saudi Arabia needs Brent prices between $75 and $80 per barrel to balance its budget and fund Vision 2030 initiatives.
Forecasts for 2025-2026 average around $75 per barrel, down from $80 in 2024, aligning with Saudi Arabia’s strategic price band.
By managing supply amid the surplus wave, OPEC+ could steer prices toward this $75-$80 sweet spot, especially if demand holds strong and sanctions-induced distortions ease.
The Bottom Line: Beyond the Spook—A Path to Stability
The surging barrels at sea have undoubtedly spooked the market, but labeling it a glut overlooks the dysfunction caused by sanctions, dark fleet adaptations, and political rerouting. With solid demand growth projected through 2026 and Saudi Arabia eyeing a $75-$80 price range for fiscal stability, the market appears poised for rebalancing rather than collapse. Traders should watch for sanction evolutions and OPEC+ moves— the real story may be one of adaptation, not excess. As always in energy, geopolitics and logistics can turn perceived crises into opportunities.
Sources: reuters.com, energynewsbeat.co, jadwa.com, finance.yahoo.com, cnbc.com, hellenicshippingnews.com ,theenergynewsbeat.substack.com,
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